DIAMOND DILEMMA

Botswana’s economy is hurtling toward a cliff, Chief Economist at SPECK Dynamics, Sennye Obuseng, has warned. In an interview with The Midweek Sun's sister publication, Botswana Guardian, he painted a grim picture of the nation’s finances, revealing that Botswana is now in its second consecutive year of economic contraction, having shrunk by 3 percent last year and projected to decline another 4.1 percent in 2025.Obuseng attributed the worsening crisis to reduced government spending, delayed supplier payments, and a dangerously low level of import cover, which he estimated could last just three months. “This calls for the government to take drastic action,” he said.In an effort to restore macroeconomic stability, the Ministry of Finance and the Bank of Botswana recently tweaked the exchange rate framework, devaluing the Pula to enhance competitiveness. The Annual Rate of Crawl was increased from 1.51 percent to 2.76 percent, while the Pula trading band was widened from ±0.5 percent to ±7.5 percent. These changes aim to stimulate exports and ease reliance on central bank forex interventions.Obuseng stressed the urgent need for economic diversification, arguing that Botswana’s overdependence on diamonds is no longer sustainable. He cited the government’s vegetable import ban as a cautionary tale of poor planning.“There were no consultations, and the approach only focused on producers, neglecting the rest of the value chain,” he said, pointing out that restaurants, hotels, and informal traders suffered due to insufficient local supply.He further criticized Botswana Oil for failing to deliver visible improvements in the energy sector, warning: “Regulation is a two-edged sword and must be exercised with due diligence.”His concerns echo those of Advocate Duma Boko, President of the Botswana National Front (BNF), who also sounded the alarm during the party’s National Congress. Boko declared that Botswana is facing a severe economic crisis, one that could derail his reform agenda.“If there are no diamond sales, then the country has no money, we are done, re sweletse!” he said, stressing the centrality of diamonds to Botswana’s revenue stream.Boko revealed that the entire stock of diamonds mined in 2024 and estimated at 10 million carats remains unsold. He warned that this bottleneck is stalling key government functions, from paying teachers and doctors to maintaining infrastructure. “The biggest challenge for leadership right now is how we rescue the nation from this situation,” he said.He further emphasized the need for urgent action and issued a directive that the diamonds must be sold by 30th July. “The economy is at a standstill. Businesses are not being paid,” Boko added, warning that the status quo cannot continue.Reflecting on the fragile economic foundation of the country, Boko lamented that Botswana’s growth had long been jobless and overly reliant on a single commodity. “Our economy is contracting,” he said. While some experts worry that selling off the diamond stockpile could flood the global market and depress prices, Boko maintained that the immediate crisis demands bold decisions.“We need to revive the economy and it will not be easy,” he concluded.

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DIAMOND DILEMMA